4 things every student borrower should know about education loan interest. As a borrower, education loan interest is something you should very cautious about. It is the price tag of your student loan and will become a cost you have to deal with for up to 10 years of your life! Therefore, before you put in your application, you need to be fully aware of all the details regarding this cost. To help you in this regard, we’ve compiled some need-to-know things about student loan interest and interest rates to ensure you are better prepared to handle this expense. 1. Your rate depends on a number of factors. The Education loan interest rate you pay depends on a host of factors. Whom you borrow from, how much you plan on borrowing, your credit score and the score of your guardians, your financial backing, etc. all play an important role in deciding the interest rate applicable on your loan. Public sector banks have lower rates but will have very stringent eligibility criteria; they might even require collaterals and margin money to provide the loan. Also, the higher the loan amount, the higher the interest rate! However, in general, you can expect to pay 8 to 14 percent as the interest rate. 2. You can get preferential rates. It’s known for students who have a perfect academic record to get better rates or higher loan amounts. So if you’ve maintained a stellar record throughout your academic life, use it as a trump card to negotiate lowered Education loan interest rates. This should work even if you’ve excelled in your entrance exams and score above most others. 3. You don’t have to worry about the rates for the first few years! Yes, you don’t actually have to worry about education loan interest amount for the initial years of your student loan repayment process. This is because an education loan comes with a trick up its sleeve known as moratorium period. With this feature, you do not have to pay even a single EMI until 6 months after you’ve actually finished the course or landed a job. This allows you to forget about interest rates until that point and focus on your studies. 4. Education loan interest equals tax benefits. Yes, under section 80E of the Indian Income Tax Act, any interest you pay toward an education loan can be utilized to claim an equal amount of deductions on your taxable income. This can be hugely beneficial for your parents (or yourself if you have a taxable income) at the end of the financial year. The best part is that, unlike a home loan that provides similar benefits, there is no limit to the amount you can claim as a deduction.
We hope this has made for informative reading and will help you prepare for your loan better. If you have any doubts pertaining to this information, it’s best you consult one of the many banks or non-banking financial companies that offer education loans. They will be more ready to offer the help/guidance you need. Good luck and study hard!